tv Digital Electric Grid Panel CSPAN May 31, 2018 10:06am-11:10am EDT
our families. i do not take the responsibility lightly. as the acting chairman of the agency. and i would ask all of you to join me in helping to promote consumer safety, because i know if we're working together, rather than in our own little silos, we can be more effective. we can move that ball of safety even quicker and closer to keeping that consumer safe at all costs. again, my door is always open, and i hope you'll reach out to me if i can ever be of service. and, again, thank you to the consumer federation of america. this is a tremendous opportunity for me to be able to be here this morning to meet all of you, and i thank rachel and i thank cfa for all of your efforts to keep the consumer safe. thank you so much. [ applause ] >> we continue this annual forum
hosted by the consumer federation of america. to hear comments from consumer advocates on the challenges surrounding the expansion and modernization of electric grid. they spoke about privacy issues and accessibility for low-income and rural consumers. this is an hour. good morning, everyone. my name is delia patterson. i'm the senior vice president and general counsel at the american public power association. i'll be moderating this panel today on digitizing the power grid. i see three major trends driving the power utility landscape today. one is decentralation. the move away from large scale generation.
the second is electriification and the third is digitization which is the move towards an intelligent grid and the opening up of data it creates. today you can't discuss designing the future of the power grid without addressing the vast revolution that digitization will present to us. like with most things, there are advantages and disadvantages to digitizing the grid. we have four panelists who will share their views on this topic of digitizing the power grid and how it impacts consumers. we have jim spears who was the senior vice president of business and technology strategies at the national royal electric cooperative association. he leads the department that comprises all technical,
engineering and economic support research and technology transfer. then we've got mark cooper, director of research at the consumer federation of america. mark is responsible for energy, telecommunications and economic policy analysis. then we have john howit who is a senior analyst at the nashville consumer law center. he's been involved with policy issues since 1981. he manages products related to low income, energy affordability and efficiency programs, consumer protection, rate design, and utility grid technology. and last but not least, we have lawrence daniels who is the director of litigation for the d.c. office of people's counsel. lawrence has an extensive background in the electric and telecommunications industry. since january 2000, lawrence has worked for the office as a
regulatory attorney advocating on behalf of consumers' interest in a number of grid cases and telecommunication cases. i'll turn it over to jim to get us started. with we'll have time at the end for questions. >> thank you. thank you all, it's a pleasure to join you. really an august group of mark, john and lawrence. a real alliance in this industry. i've had the great opportunity to join inner eca. i'm going to give you a few statistics about america's electric cooperatives and what that amounts to. then, again, as we see, it's some of the challenges and opportunities. before i do that, is steve brobeck still in the room? steve is retiring after 38 years as a great champion of consumer protection. and we are all consumers, we take consumer protection seriously.
we also have mark lowry, i think many of you know him, he's been a long-standing champion of consumer federation of america who is retiring after just about 38 years. his last day in the office is today. this is a very bittersweet day for me. i came to nraca to work with martin and to establish this thing that is about how the cooperatives and consumers can participate in this new digitized environment. fast forward, think about small municipal utilities. they faced many of the same challenges and threats we do. i want to give you just a minute. how many of you belong to a cooperative? r.e.i. come to mind? credit union come to mind?
food cooperative come to mind? you know the cooperative movement. cooperatives were first founded, the rochdale principle. for producer welfare. at the same time the idea of consumer cooperatives came together and we as distribution cooperatives are consumer cooperatives. you see that c.o.o.p., they're now aggressive labelling as a co-op. which means they are putting the consumer first. which is an important issue. we work kind of anywhere in the industry, anywhere in the world. it's really important. a couple of factoids about america's electric co-op
42 million consumers. we can mobilize consumers, the grass roots world, very aggressively. a couple weeks ago here in washington we brought the leaders of america's cooperatives, close to 80,000 strong. we didn't bring all 80,000, but we had 2,000 to come to capitol hill and advance the consumer needs of rural america and to that on capitol hill aggressively. those are the things that trade associations normally do. this whole business and technology thing is a new kid on the block. think about the 42 million consumers, about 60% of the land mass of the united states. but you have in rural america, you have, you know, some places one or two consumers per mile a line. average of seven. investor owned utilities, average of 30 to 35.
municipal utilities, potentially 40. rural america starts with a handicap. they are going to have higher prices. we understand that and work with it. think also about we comprise about 42% of the distribution infrastructure. same amount of infrastructure as investor owned utilities. and so the challenges in rural america to get the consumer welfare and protection and high quality affordable electricity is a continuing challenge. again, many of delia's members face that same series of challenges. a couple of other things. manufactured housing. about 5% of housing stock in the united states is manufactured housing. in cooperative territory it's more than double that. 14%. right there we have that challenge. if you think about the
health care epidemic in rural america, the opioid issues, there are a lot of challenges facing rural america. and i guess the question i pose to you, i would bet most of us are consumers here in urbanized areas. how many would say you live in a rural area? there's a couple. why should we care about rural america? it's really simple. national security. urban america consumers are dependent on rural american consumer producers for water, food, and energy. think about that. every day you're dependent on rural america. it ought to matter. i think the cooperative movement and the consumer welfare and putting consumers first is really the centerpiece of what we try and do it. let's talk about the digitization and what this new landscape is that delia laid out for us. what are some of the threats? well, data.
data security and data quality is a huge issue. we're collecting literally mountains of data for all of you as consumers on a daily basis. how many of you have a nest thermostat or a thermostat over your phone? you probably didn't realize you're signing off your data. we take that data security very seriously. we put consumer data privacy and security first. after safety, safe electric system operations. but your data, it's not the cooperative's data. we want to figure out how to help you harvest that data for value. the digitized world is giving us a whole new way to think about it. once you think about data and the opportunities there. think about equal access for all.
low and moderate income. how are we going to be sure that consumers are not left behind in this digital future? we have a major initiative on access for all. there are really great ways to use this new digitized technology platform and the data to empower consumers to make an informed decision. how many of you love prepaid metering programs? if they're done correctly, if they're done correctly -- and i'm not implying all utilities have tried prepaid metering and have done it correctly. you're now giving consumers data and knowledge and they're going to save anywhere from 8% to 12% of their electricity consumption based on how they use electricity as part of their quality of life. data are critical to the quality of life and economic prosperity.
how do we empower consumers to be able to use that now? we used to have one data point a month we collected out of a meter. now we're collecting data every 15 seconds. think about the volume of data. we're in big data now. so what do we do with that? how do we use that for consumer protection? but also for consumer value and consumer welfare. those are some of the challenges. we talked about the low and moderate income. the housing stock in rural america. also, the other challenge, how many of you have high speed broadband? about half of rural america does not. 34 million consumers are underserved or non-served on high speed communication. if we don't figure out how to do that, those consumers in rural america are left behind. in this day and age, you simply
cannot function -- i can't function -- without high speed communications. think about going to that spot where you no longer can communicate. now, if you're off on vacation, that's actually a pretty good deal. if you're talking about quality of life and economic prosperity, that's not such a good deal. if you go back to national security, broadband is -- or high speed communications, whether it's fiber or a hybrid approach, is in the eye of the beholder. so we think there's some real opportunities, but there's significant challenges. so we're working a lot with the administration and with congress to think about how and what's the appropriate role of federal support for expanding high speed communication so that no one in rural america gets left behind. one other quick factoid on what rural america faces. persistent poverty. 88% is served by cooperatives. a big part do not have broadband.
as we think about lifting people out of poverty and taking on the healthcare epidemic so the consumers have real quality of life opportunities across america, we've got to do infrastructure development. we work on that extensively for the trade association as i know delia and her partners do exactly the same. we've got some real challenges. there's a phenomenal opportunity for all of us. banding together, i think, to really put the consumer first, which is what cooperatives are all about and being able to bring these opportunities to the table helps us mitigate those risks of the future. one other just small point, how many of you have gone through a serious storm where you've had your power out for a day, two, three, four, five? six? seven? there's a new concept called reliability. old concept of reliability we're applying a new filter to it, resiliency.
the ability to return to state more quickly. the platform that delia talked about is phenomenal. this thing we call microgrids where you build a small system and build it so it can stand alone and it can recouple with systems far faster. small municipal communities were the first microgrids. we didn't have a big grid to tie to eight years ago. we had to electrify rural america a grid at a time. this whole digitization platform and what that means for selling more electricity with better environmental improvement, the electriification of rural america. i've taken too much time so let me sit down. let me turn the mike over to my fellow panelists.
>> good morning. my name is lawrence daniels. i am with the office of the people's counsel. we're located a few turns around the corner from this hotel. we are the statutory advocate for utility consumers in the district of columbia. i have had the good fortune of being with the office almost 20 years now. i started in 2000. it really is -- i've been fortunate. i've been able to see how the energy industry has evolved dramatically. and 20 years is really just a blink of an eye when you think about how long the electric industry has been around. in these short 20 years we've seen a lot of change. it's been my fortune to actually watch this change. there are four principles for consumer advocacy that we're focused on as we face grid modernization.
the d.c. public service commission who is the regulator here of the investor owned utilities, has a proceeding for grid modernization. and we have submitted a substantial amount of comments and also attended several technical conferences to address a lot of the evolving issues going on with grid modernization. this morning i'll touch on four principles, believe me many more, but i want to touch on these four to start off our discussion that i believe must be in place in order to have consumer protections as we go forward. first, the long standing consumer imperatives must evolve with grid modernization. quality service adjusting reasonable rates is the foundation of consumer protection as it concerns utility service. but as we usher in technology modernization, other principles have to evolve with that foundation. one, important to us is equal
access to the benefits of this new technology. technology should not usher in energy inequality. we have to make sure that everybody can benefit from the technology. although they might not be able to afford a solar system on their home, community solar has offered a lot of opportunities for folks who live in apartments and don't own or cannot afford solar to have the benefits of solar technology. that's one policy that we have seen that we would like to see as we continue to evolve. also, affordability. affordability has always been a foundational principle for consumer protection, but even more so going forward. because as new technologies are coming along, we have to pay for them. nothing is free. and we have to make sure that those who maybe perhaps cannot participate in this new technology are not subsidizing those who can.
so there are going to be some challenges there, so that's the foundational principle. and also cyber security. as mentioned protecting our data is going to be critically important as we go forward. so we have to have a focus, regulatory focus on making sure that cyber security is maintained. secondly, control of the modernized distribution system must be made clear. for well over a century now investor owned utilities have been gate keepers of what happens on the network. but that can be regulated by the vendors now want to connect to the network but we must prevent these entities from actually introducing these new technologies are not blocking progress. and we are starting to see where some regulators are coming up
with policies that can actually introduce these technologies to the network without disrupting reliability first and foremost, but also that we can actually have benefit of these new technologies. third clear set of rules. system information must be established early. big data is an issue that we'll all grapple with, not only in this industry but several industries. i grew up in the telecommunication industry coming out of college. and after law school i was in energy industry. and same thing that they grapple with, with data management, energy is now beginning to understand and in some instances bump its head a couple of times dealing with big data. as jim said, in the energy industry, when i started in 2000 there was only one data point
the bill that you got at the end of 30 days. now collecting data is available on a second by second basis. and all this information now tells a pretty intimate story how you actually use your energy. and that information has to be protected. and it's critical not only to the integrity of the network but also critical to the confidence that consumers have in using the network. if they don't feel confident that their data is going to be protected, they are not going to engage in the modernization, and that can lead to some pitfalls in terms of shortfalls, rather in meeting certain environmental goals and also some other goals that different jurisdictions may have that are relying on for consumers to engage. lastly, mechanisms to measure the effectiveness of modernization must be in place to guide future policy decisions. there is an old adage that you cannot manage what you don't measure.
and benchmarks have to be established early to see whether or not we are being successful as we march forward with this modernization. especially important when dealing with the energy industry because the electrification of america really was the technology that allowed this country to be as great as it is right now. and if we don't make sure that grid modernization is done in a responsible and actually ethical way, we have to make sure we have mechanisms in place to say are we meeting our goals, how do we adjust, i think that's one big thing this industry has not had to do in a long time, and that's adjust. benchmarks are critical to ensure we know where we are and where we are going. finding out how new pockets of consumers. some want a lot of options with
pricing and in home technology. others do not. how do we start to develop policies to make sure everybody's needs are being met but also making sure that the network is running safely and reliably. with that, i'm going to step down. and allow my other panelists to come forward and then answer some questions at the end. thank you. good morning. steve brobeck, thank you very much for the invitation to be here and congratulations to you on amazing career. cfa is such a great partner of national consumer law centers and certainly wish you all the best. john howat, i am with national
consumer laaw center. we are a low income law and policy advocacy group based here in washington and in boston. i would like to give a special hello to my colleague olivia wine who is here and also to will ogburn who ran nclc for many, many years, and grew an organization that's unique and certainly wonderful. ben at national consumer law center now for 19 years now. and will regrets every minute of it. [ laughter ] i would like to talk a little bit about grid modernization as it relates particularly to lower income consumers. data privacy issues that we have
heard about are extraordinarily important. i'm going to side step those a little bit. because some of the general consumer advocates here have got that under control. i'm going to focus on a couple of specific low income issues. i start with the assumption in my work on technology issues at nclc that clean energy is an imperative. there is no trade off between clean and affordable anymore. they are both imperatives, equity is important, but climate change is real, and low income individuals and families are the first to be affected by the ramifications of climate change.
so one of the opportunities we face is carbon intensity of the grid. and as jim talked about, we have access to two-way information flows. that we need to modernize the grid in order to accommodate two-way power flows as well. if we want to have renewable energy that is available during certain periods of the day or night and doesn't run like a regular base load generation plant, we need a modernized grid to be able to accommodate that. so really i think this imperative for decarbonization turns the need for grid modernization into more of an opportunity. i would say that one of the aspects of low income energy advocacy that's changed a little bit over the last five to ten
years is the extent to which there has been effective collaboration between consumer and clean energy advocates. this is another opportunity. but some of the green energy friends are pushing affordable programs at the state level. we as low income advocates are strong energy efficiency proponents and we are finding a lot of common ground. so i would put this opportunity to collaborate in the plus column in terms of opportunities and challenges. well, in terms of concerns, i think with a lot of the investments in the new and modernized grid, there are
upfront costs and anticipation of economic benefits that are often somewhat speculative and at best somewhat removed from the present. so there is a timing gap here. and this is a concern for folks looking at cash flow challenges every day. so how are we going to allocate these first costs? that's a major challenge. we have unequal home energy burdens. you understand that if the energy burden is a function of a household's income and their income expenditures, well, for lower income households that burden is just by arithmetic much higher. and that's another challenge we face with these upfront costs. household cash flow is paramount for our clients at nclc.
it's day-to-day cash flow that really matters. so some of the up front costs with grid modernization create particular problems for our clients. a report olivia sent around awhile ago demonstrated that payday loans, which i think a lot of the folks in this room are familiar with, the number one reason people take out these sometimes devastating loans is to pay utility bills. so cash flow. i don't know how well you can see this, but there was a 2015 survey of all residential consumers in the united states. and the results showed that among households below $20,000 in income, 40% at some point during the previous year had given up a basic necessity to pay an energy bill.
a basic necessity like food or medicine. so we have cash flow issues that are critical and we need to deal with them. advanced metering, when a lot of people think about smart grid, smart meters are the first thing they think about. and so i want to just say a few things about advance metering. concerns for low income falls into three major categories, they are the cost of the system, they are not cheap. there is remote disconnection that can occur with advanced meters that didn't occur with the analog where a person with the wrench would have to come and turn that off. and then there are potential penalties from these time varying rates that the smart meters enable. so i would like to deal with these one by one very quickly. system costs, that first problem.
well, we have a toolkit full of effective low income energy assistance programs, both bill payment assistance and energy efficiency. and as we deploy these new technologies, not only smart meters, but other digital technologies, the importance of these programs really increases. so in terms of remote disconnection, we have also a toolkit full of regulatory consumer protections. the thing is they need to out pace the deployment of these new technologies. but we have some great models to work with. with respect to prepaid service, i've got to say that for low income households, this is really problematic.
prepay is concentrated among low income households, wherever it's offered, in united states and abroad. the disconnections from prepay are far out paced that of post paying customers. in terms of providing the informational benefits through prepay, i say give it to everybody, not just folks who are at risk for disconnection for nonpaymnet, but everyone should have access to realtime consumption and expenditure information. and i want to finish up quickly. but in terms of penalties from time rates, we can hold harmless those who move to time varying rate if they say their income qualified for bill payment assistance or live heat, let's have hold harmless provisions so any penalties incurred through some critical peak price or
other time varying rate, these folks are held harmless through rebates. you can opt into these programs particularly from the beginning and that's a great protection. you can also have what's called shadow billing where you can provide consumers with what they would have paid under the various rate options that may be available. we need a planning and regulatory process that explicitly takes into account both clean energy objectives and equity and affordability objectives. but none of these are impossible. these are not really rocket science. it's a matter of politics. some of it costs money. and so that has to be dealt with. but it's not impossible to move forward toward clean energy in an equitable and just way. so i'll leave it at that. and hope i didn't go over too much.
morning. there we go. i always look at these opportunities to speak at the consumer assembly as opportunity to give a call to arms. it's not something i get much time to do, especially when you are testifying. so my call to arms today is simple. the technological revolution has already occurred. it's time for consumer advocates to get on the right side of history, embrace the revolution, and defend the interests of consumers going forward into a progressive future. you cannot go back. you can be left behind or you can improve the state of your constituents. now, my approach to slides is somewhat different from most people.
i always do a big slide. hopefully i have a simple point. and my objective is to convince you to read 500 pages i've written in back of it. i call it analytics and service of progressive advocacy. i can a lecture i can give on that too but not today. i'll get around to grid modernization, it's actually the sixth slide, so it's there. but this slide shows the last 50 years of the economics of electricity generation. and what has happened is we have had a revolution. the alternative is wind and solar. efficiency has always cheap has become the least cost options. and the cost of carbon, social cost of carbon is irrelevant. it doesn't matter anymore. the least cost resources are alternative low carbon resources. now, using of course carbon will determine not the direction but the speed it goes.
so current administration is spending immense amount of time trying to get rid of the cost of carbon. and every proceeding that i have been in the consumer pocketbook savings of efficiency and renewable justify them without a cost of carbon. they are fighting the last war. i'm fighting the next war. there you go. i screwed that up. all right. that happens from time to time. technology. so with this slide is supposed to show you is that there are certain range of countries up here and states at the top that have actually driven the penetration of alternatives to very high levels. and if this slide didn't have all the silly slides, it would show you almost all of america is already behind europe, all of europe. and so we are falling behind.
and we ought to be concerned about that. why are we falling behind? we are falling behind because the digitization of the electricity system is simply another iteration of the digital revolution. right. we've had a digital revolution. does anybody in this room not have a cell phone? does anybody in this room not have a laptop or a tablet? now, if you are in this room 15 years ago and asked the question i would ask it the opposite way. no one in this room raised their hand. the digital revolution has occurred. and forget this business about the internet being broken, it's not. everything you do is more efficient because of that revolution. on average, in america people spend 20 hours a week on the internet. 20 hours a week. that's a lot of time. i started studying this in mid-'80s and the question was where would the time come from? and everybody said oh the time is going to -- internet is going to eat the tv.
people would stop looking at the tv and start looking at the internet. turns out they watch exactly as much tv as they used to. unfortunately, that's what they do. so where did those 20 hours come from? they came from the work of daily life. they eliminated all the crap that you used to have to do get things done. so now you call forward, you look something up, you don't waste a half hour going someplace that doesn't have it. and you do that 40, 50, 60 times a week. tremendous efficiency. that is what is happening in the electricity system. it is enabling us to use resources, to distribute resources, much more efficiently, to balance supply and demand. every characteristic of the digital revolution is now expressing itself in the electricity system. it's expressing itself in a way we shop for groceries. amazon has disturbed the world.
they are going to deliver groceries. now everyone has tried to deliver groceries they didn't understand how the revolution works. the guy alt amazon actually does. so it changes it and electricity is no different. so to remind you, i'm going to pull a couple headlines. the picture of that duck is famous duck diagram where solar takes a big wedge out and raises this question what are you going to do with the other times. that picture is not california where you've seen it, not arizona where you've seen it, that's new england. which new england is not a very sunny place, folks, if you've lived there and i lived there for a while, dug out 18 times from the snow. that was a day in april in new england. it was a hallmark day transformation. and only begun because, look, there are in fact significant inefficiencies in that system because we would be better off
saving solar and moving it to fill in, right, both the top of the back and the belly of the duck. and you know what, that's going to happen. it's already happened. solar plus batteries is the least cost peaking in arizona. fascinating second headline i didn't have time, it was in the newspaper this morning, they voted on it yesterday, california said every new house is going to be solar. and of course the headline said oh my god all those solar panels on roofs, very expensive. i could go back to my original graph and show you that's not the future of solar. but if you look at the order they said the builder has to build either a roof top or a community. and i bet utility scale solar is going to count too. and so every, almost all houses are built in tracks and developments very few specialized houses and those people can afford to have crap on their roofs. doesn't make any sense, right.
so every builder who is looking at competing in the marketplace is going to put up x number of units and do one of two things. he's going to build in community solar which is low cost resource and everyone is going to have a battery for six hours of back up or going to make a deal with utility to build sufficient capacity to match every home. and the member of the puc who is responsible for this, someone i've gotten to know very well inefficiency stuff says the benefit cost ratio of solar is 2 to 1. and i think he was talking about roof top. when you do community scale it's 4 or 5 to 1. this is a done deal. and the rest of the world is going to get there too. we should also. now, i go back to this other one. but let's be clear. technological revolutions which have already occurred are very, very disruptive things. and the technological revolution is over but we still have to
have a socio institution revolution. we have to support that system. so this is a little contrast between the 20th century which is simple system. build capacity to follow load wherever it went. the future is managed low and supply, put them together, use all that information, it's very important, but i'll suggest how to handle it, right, and we have to build that institution. and that's where the struggle really becomes. so this is the sixth slide, that's grid modernization. i told you i would get there. so we are at what is called a turning point or critical juncture. i call it a quarter life crisis. it's almost a quarter life into the 100 year history of the revolution in which we decide which way we'll go. and there is always a battle. there is always a huge battle at that moment when people look out and say oh my god there is the
future, i see it and a lot of people say it scares me. and the people that scream the loudest are the greenback party at the second industrial revolution, and the party of trump. which may or may not be the republican party. the coal miners. they look at the future and say the future is coming it's terrible. they didn't do well in the past. let's be clear. the 20th century were not kind to coal miners at any point. but now looking to the future and there are no coal miners and that looks scary as in the state of the 21st century. at least the state had the sense to reject that's the way to do things. so we are at these critical juncture and you can't take a leading nation like america and turn it back and watch the rest of the world pass you by. that's what happened to the british. they were the leader for the first and early second
industrial revolution and they got confused about what to do and they were passed by. so we are at that point. you can make that mistake. i would encourage you not to. but in order to encourage you not to, as consumer advocates, you all like progress and whatnot, but now we need to have principles for progressive policy. rate making you have heard about. every one of the suggestions you hear i have heard before, i believe you can justify in rigorous analytic terms. i have given you the economics, here are some principles about energy justice, availability, affordability, intergenerational and intra generational equity and so forth. articulate them and explain to policymakers exactly how they will be achieved in real world policies. and here is my favorite graph,
an economics graph that nobody understands, but that's okay. there are two problems and you heard about it, one is on the supply side. the current rate structures are riddled with inefficiencies, excessive monopoly profits, all kinds of things. we have to get rid of those and is that shifts the curve a little bit or a significant amount, and then we have the demand side and we have a simple proposition, the value of electricity to a low income household is higher than the value of electricity to an upper income household. right? keeping the lights and the rechbl operator on is a lot more valuable than heating the pool to put it bluntly. so it is easy to argue that making the kinds of concessions that john s. swore in terms of making low income people on the grid, enabling them to have electricity, even if you have to underprice them against your correct costs, increases social
welfare because the value of a kilowatt to a low income household is greater than the value of a kilowatt to a middle and upper income household. i don't have to say resolve the efficiency equity tradeoff that way, but if i do economics right it's on my side. the simple fact of the matter is that if we restructure as we do on the right side the gain in consumer surplus on that little left hand box is larger than the loss of consumer surplus for middle and upper income people. so total social surplus is higher. and i'm perfectly happy to be cross-examined for that, but i like steve and others am trying to retire. so at the end of the day we really are at a turning point, it is really a critical moment and john is one of the people. there are folks on his listserv that give me heartburn, we argue about that, they don't want to
see the future. they don't think they will be well treated in the past, the weavers weren't well traded either, but breaking their machines didn't get them anyplace. the farmers, the coal miners, weren't well treated anyplace very well, but not telling their kids that they had to go to college was a big mistake. they kept telling them, hey, you're going to get my job. they never should have wanted that job anyway, but they didn't send them to college. there is a big thing yesterday on the news about how the next -- the training and education is the key to breaking the cycle of poverty. so that's my call to arms. now is the moment for us to really support this stuff. we are going to have plenty of chances, especially with an administration that wants to go in the wrong direction, and they need to hear unequivocally from everybody in this room, which on every other issue you wouldn't hesitate for one second to oppose the party of trump. don't blink on electricity and energy issues. thank you.
>> okay. we've got some time for a couple of questions of our panelists, so i just would throw it out to the audience to see if there are any questions, if not, i have got a couple of questions that i have of my own. any questions? okay. john mentioned -- we do have a question. >> hello. i'm the director of illinois perg and have been engaged in these issues. we have a grid modernization program going on in illinois right now and it is unfortunately dominated by the engineers and so i'm curious on what advice you have for consumer advocates who are not steeped in the details of the highly technical nature of some of this policy, how to engage in some of these processes to ensure that consumer protection
values are preserved through the processes. >> i'd like to answer that one by pointing to the pope's encyclical on climate change which one of this -- anybody this this room has head and i would encourage you to read it. it is a remarkably progressive document and the pope is a jesuit, he was a chemist and so he believes in science, unlike some other people in washington, and he made a simple observation. i believe in science, but science that is not in service of social values is useless and harmful. so the answer is that engineers can give you answers to questions, but they are the wrong questions. the question for the engineer is how to maximize social values and if they don't recognize as i said that low income people have a bigger claim to a smaller number of kilowatt hours, then
they should leave the room. they are not part of the debate. their charge should be how do you serve john's people in the most efficient manner you can, and it turns out that their science has always been less constraining than you thought. the digital revolution is about innovation at the edge, not utilities and centralized planners. it's all kinds of crazy people doing all kinds of crazy things and some of them stuck and they've created this. so to me that is the answer, is that their science needs to serve society and when they try really hard it turns out you are not going to impose much pain on them. but they don't think about that. >> let me add to that, this is -- cooperatives particularly are not rate regulated, the local board really is there to represent the consumers and the consumer welfare. setting that aside, as an old regulator, i had the colorado commission years and years ago, the best advocacy that you can
bring to the table when you have all of these data pieces and all this stuff in front of you, bring consumers that can talk about what they need, quality of life, economic prosperity, improving the environment, those issues at the end of the day will start to dampen what we always had in the regulatory world is that you can get buried with data. so get out of the data world and get to real life stories about the incredible value of this new paradigm that we've all been talking about. bring people to the table. regulators will listen to people. average regulator less than four and a half years by some counts, so the regulators oftentimes don't know what's going on, either. they don't have steep backgrounds in this space. that's not a criticism, that's just a reality. so bring people to the table and you will make a difference. >> i think that was a great
question and the challenge at the state regulatory level it seems is for advocates to get together before these proceedings are well under way and to insist on a planning process that incorporates the objectives and values that we think are important. a lot of the utility regulators now, they are not used to looking at what they call noneconomic values, you know. mark correctly points out the economics associated with inequity, but the utility regulators for the most part they are just not used to looking at these sorts of values. so i think if we have a planning process that is applicable to really any sort of new proposition that comes forward with respect to grid
modernization, rate design or the regulatory paradigm, all these big questions we face and that state utility regulators as well as the co-ops and munys are facing, if we have a process that looks explicitly at what would be the pham fictions with respect to energy -- you know, relative energy burdens, what would be the impact on secure access to service. take some of these very basic metrics and incorporate them into the planning process and the evaluation process, then i think we have a chance and the engineers are going to have to take a deep breath and relax for a few minutes. >> real briefly, i would just say that i would tell the regulators, as we are, that the public interest really is a balance of a lot of different factors. you are going to have the technical aspects of it, that's obvious, the economics are
there, the environmental, but really whether or not all of this is going to work is whether or not consumers are going to use it. how they're going to engage with it. their interests are, i would say as a consumer advocate, the priority. and it really are going to be the drivers. their interests are going to be the drivers. so you just have to make sure that consumers voices are absolutely heard. and i agree, you have to bring the consumers' real life stories, anecdotal stories to the table, to the regulators, because that's what they are, they're people, too. >> okay. we've got time for one more question. >> hi, i'm becky bowman with howard county office of consumer protection in howard county, maryland. so in the old days there was a utility and then there was the regulator of the utility. now we moved into a bifurcated system where we have electricity generation and the utility that's controlling distribution and you still have the regulator
of the utility that now has some power over the sellers of generation. what is the regulatory structure going forward, what should that look like? because it does seem like we are trying to fit a square peg into a round hole, but i'm not sure how we go about shaving off the corners. >> well, the interesting thing to me is that the role of the utility and the regulator in the 21st century are in some respects much larger and more important than they were in the 20th century. the 20th century was about utilities which liked to pour concrete and boil water, and that was all there was to it generally. they will get angry when i say that, but it was a relatively simple process and it was easy to figure out how much to pay them because you could do the rate of return on pouring concrete and boiling water. in the future they have to manage a very complex grid. it's a lot harder, but it
doesn't -- and it's a lot cheaper, precisely, because it doesn't require all that capital. it requires intellectual property, incompetent electric actual management. and that's the big challenge. we have to find a way, and consumer advocates bristol, they really like to know the rate of return, they can always argue for a percent less and calculate how much they can save consumers if they got a percent less, but now we have to figure out how to pay these guys for managing a very complex grid, and that's going to be a lot harder, but the total cost ought to be a lot less. so if that is the future, then the regulator is going to have to be less of an accountant and more of a manager. he's going to have to be a referee between -- and understanding making sure that consumers get the value they want, giving the end edges as much power as they possibly can,
which is one of the big deals in the digital revolution, but also it's a light handed question of letting the folks managing the thing innovate it. and we are having this great debate about network neutrality. that's what the debate is going to look like over grid management. it's an ugly debate but it's an important debate, and it's a debate that we can win as we've shown over the last -- i personally over 20 years have been involved. so it's a different kind of role. i think california, mcallister who i have gotten to know is very much in that mold. he is an economist, he understands the complexity of economics and, in fact, they need to be political economists. there was no such thing as economics at the beginning. adam smith was a political economist, carl marks was a political economist. they didn't study economics for the purpose of economics, they studied it to implement policy and make society better. they obviously had difference
about how to get there. he's not an accountant, he has got to be flexible and sensitive and he's got to have a process that gives consumers their voice, gives utilities their voice and then you've got this third set of generators who are in most states still inside, in some states they're outside, but, again, a generator who doesn't have a market is out of business. so that generator has to figure out how they're going to live within the confines of managing this grid. >> let me give you one add on to what mark said. i always find it aggravating when i have to agree so fully with everything mark says, but all that aside, so even though we are not rate regulators our boards sit as the regulator for exactly these purposes and managing and regulator, quote/unquote, this new thing is a daunting challenge. i think to the point that toop tiffs are seen as being leading
innovators in the whole grid modernization. we now have that reputation with doe. one of the reasons is that it's far faster cycle for us to make decisions and to put new things and tests in the ground than it is for an investor on utility that has to go through a long drawn out regulatory process that has to have all of these different interests accommodated at the cooperative level you can move pretty quickly. i think dellia's boards move very quickly. right there you have very tangible examples of investor owned utility regulatory model that's kind of out of synch with where this is going. i think that side of it for the investor on the utility community and consumer council's role will be very significant on how that moves forward. >> i absolutely agree that the -- sort of the traditional regulatory paradigm that's based strictly on cost of service
regulation is no longer as relevant as it used to be. and that performance metrics are going to have to come into the equation. what's really critical in that transition in my view -- and, by the way, i would not think we are going to completely replace cost of service regulation, but we're going to enhance it with performance metrics, but we need to get those metrics right. if we don't pick the right metrics then we won't get the right outcomes and right now the folks who are talking about performance-based regulation focus very little on issues of equity and i think we have a lot of work to do to change that. the other piece very quickly here is that during this transition we've already talked about the extent to which access to new technology is not evenly distributed. low income folks don't have all
the newest energy management equipment, don't have all the new energy efficiency technologies, certainly are not putting solar panels on their roofs, even if they own one. so i think during this transitional period having access to a utility service that's part of a franchise monopoly, whether it's an iou or cooperatively or municipally owned, it is less relevant than having a provider of last resort that will ensure access to reliable and affordable service for everyone. >> one final point. some of this conversation stimulated. so in this new loosey goosey world we are not doing roe and pouring concrete and boiling water, what are the principles? in that kind of world two principles come -- two questions come to the fore, one, who has the right to act?
in the old days the utility had the right to act on everything and then the puc decided whether they would recover the cost for that. in the future the right to act has to be distributed more evenly. consumers have a right to act, supplies have a right to act. second principle question is who bears the burden of proof? that gets very different now. so if a consumer has a right to act to put a solar panel on his roof, the consumer doesn't have to prove they've done the right thing, the utility has to prove they've done the wrong thing. if you go back to the digital revoluti revolution, the second most important decision was called carter in which the fcc said anybody can plug anything into the wall as long as it doesn't hurt the system and that gave us the cable modem it turns out. and of course at&t said, oh, my god, it's foreign exchange
equipment, it will blow it up and the fcc said, bull. you have to put a jack in there that an ordinary consumer can plug in the wall so you don't have to roll a technician and if you think that blown is going to blow up your system you have to prove its hurting you, he doesn't have to prove its beneficial. that was part of the revolution. that's -- that happens here. the right to act, shift the burden of proof, and that's where you -- the regulator gets to see, we get good behavior that way it turns out, people don't want to blow up the system, they want to figure out stuff that makes it work better and the regulator steps back and at&t tried for a while and then they gave up. they said, well, we are not going to stop these phones from getting plugged in and they went on to find another fight just as evil, but at least it was a different fight and we are plugging stuff in. >> okay. folks, we have to leave it there, we're running out of time. pl